companies-in-government

Briefing

Cross-government

Companies in government

DECEMBER 2015

Our vision is to help the nation spend wisely.

Our public audit perspective helps Parliament hold government to account and improve public services.

The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 810 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.15 billion in 2014.

The National Audit Office study team consisted of: Charlotta Blomberg and Imran Qureshi, under the direction of Matthew Rees.

This report can be found on the National Audit Office website at www.nao.org.uk

For further information about the National Audit Office please contact:

National Audit Office Press Office 157–197 Buckingham Palace Road Victoria London SW1W 9SP

Tel: 020 7798 7400

Enquiries: www.nao.org.uk/contact-us

Website: www.nao.org.uk

Twitter: @NAOorguk

Contents

Summary 4

Part OneConcepts 10

Part TwoMeasurement 12

Part ThreeFormation 23

Part FourGovernance and accountability 29

Part FiveDepartmental mapping 37

Appendix OneSummary of mapping by department 62

Appendix TwoDescription of company types 66

Appendix ThreeSample test of governance arrangements 68

Appendix FourAudit approach 70

Links to external websites were valid at the time of publication of this report. The National Audit Office is not responsible for the future validity of the links.

4 Summary Companies in government

Summary

1 This briefing explains how 3,038 companies relate to each of the 17 central government departments;1 and shows how the number of companies has increased since 2010. It is based on five publicly available sources of information on companies in government as at 31 March 2014. It explains the basis for each source and how the results differ.

2 This factual briefing does not seek to evaluate any company, nor to reach any conclusions about value for money. The facts presented in this report may however raise issues relating to transparency, accountability, governance and review. It makes reference to the accountability and governance themes which have been examined in previous reports concerning the Cabinet Office’s Progress on public bodies reform,2 and The Shareholder Executive and Public Sector Businesses.3 It is also a companion for our recent report concerning the financial institutions landscape, which contains descriptions and financial information about a number of large companies and the implications for the government’s balance sheet.4

Scope

3 This briefing is structured in five parts:

• Part One introduces some important definitions and concepts which are applied throughout the report.

• Part Two identifies five public sources about companies, compares the lists derived using each and explains why the contents differ. It also summarises the sixth source – a full departmental mapping – that we have created for the purpose of this briefing, and which is published in Part Five.

• Part Three describes the process of creating arm’s-length public bodies and the circumstances in which they may be incorporated as companies, Royal Charters or statutory corporations. It also describes the public bodies reform programme.

1 The analysis relates to the position during the 2013-14 financial year, consistent with the most recent WGA in order to achieve consistency with the sources of information used. Recent developments are summarised in Part 2.

2 Available at: www.nao.org.uk/report/progress-public-bodies-reform/3 Available at: www.nao.org.uk/report/the-shareholder-executive-and-public-sector-businesses/4 Financial institutions in government. We have also published an interactive data tool alongside the financial

institutions landscape to explore the financial profile for the financial institutions landscape, many of which are companies in government. Available at: www.nao.org.uk/wp-content/uploads/2015/09/Financial-institutions-landscape.pdf

Companies in government Summary 5

• Part Four describes some of the key relationships between departments and companies; how principles of public accountability are combined with corporate governance arrangements; and compares the approach to assurance of companies in government and other public bodies. We did not examine the processes of individual departments when creating new companies.

• Part Five contains a detailed mapping of companies to each of the 17 central government departments, reflecting the position at 31 March 2014.

4 We have included companies which central government wholly or partly owns or controls. We included the parent company and first-line subsidiaries where this information was readily available. The scope does not extend to local government, NHS, police and fire, higher and further education, local partnerships, limited liability partnerships (LLPs), community interest companies and public service mutuals. The financial sustainability of companies in government is also outside our scope.5

Key findings

5 There is currently no single, definitive, source of information about the number of companies in government. To identify companies in government we used available public sources listing entities which make up the public sector landscape. None of these sources are designed specifically to identify companies owned or controlled by government. Consequently these sources lead to different totals, (paragraphs 2.3 to 2.19). The connection between the sources is set out in Figure 1 overleaf.

The public sources are:

• The Public Bodies Data Directory, which Cabinet Office prepares, identifies 28 companies. This directory is a compilation of public bodies operating at arm’s length from their sponsoring departments. Only if a company has been categorised as a type of public body6 does it appear in the directory, (paragraphs 2.5 to 2.6).

• The public sector classification index, which the Office for National Statistics (ONS) maintains, identifies 69 companies. The ONS classifies entities to the public sector using a test of control which is standardised across the European Union to achieve consistency in the way that governments calculate national debt, (paragraphs 2.7 to 2.9).

• The Whole of Government Accounts (WGA), which HM Treasury prepares, identifies 69 companies. The Treasury specifies which companies, alongside all other public bodies, should be included in this consolidated financial statement each year. It is based on a similar approach to the ONS, (paragraphs 2.10 to 2.12).

5 This report predates the ONS reclassification of approximately 1,600 “Private Registered Providers of Social Housing in England” as Public Non-Financial Corporations on 30 October 2015. Available at: www.ons.gov.uk/ons/guide-method/classifications/na-classifications/classification-announcements-and-statements/classification-of--private-registered-providers--of-social-housing--including-registered-housing-associations--in-england.pdf

6 The administrative categories in the Public Bodies Directory include non-ministerial department (NMD), Executive Agency (EA), which includes Executive Agency Trading Fund (EATF), Executive, Advisory or Tribunal non-departmental public bodies (NDPB) and Public Corporation (PC) which is a statistical not administrative classification. These are sometimes referred to collectively as arm’s-length bodies (ALBs).


Figure 1Summary of classifi cation of 218 companies in government identifi ed by the NAO

Notes

1 Not to scale.

2 National Audit Offi ce tally of companies in government: 218. Not included in central databases: 134 (including 9/11 special shares, 17 dormant rail companies and 21 Community Rehabilitation Companies).

3 PBD is the Public Bodies Directory maintained by Cabinet Offi ce.

4 ONS is the public sector classifi cation register maintained by the Offi ce for National Statistics.

5 WGA is the Whole of Government Accounts.

Source: National Audit Offi ce analysis

ONS 15

WGA 14

27

PBD

27

1

Area represents the total of 218 companies in government

134 not included in central sources


6 The aggregate total of companies identified in each of the three sources is 84 companies, of which 27 appear in all three sources. The partial overlap stems from application of the different methods, and concerns a number of key concepts including how to distinguish between function and form, ownership, control and independence (paragraphs 2.17 to 2.19, Figure 1).

7 In total we have identified 3,038 companies in government, including 2,591 Academy Trusts, 218 parent companies, and a further 229 subsidiaries of these parent companies. We amalgamated all three sources described above, and supplemented it with a review of departmental annual reports and accounts and the Companies House register. We adopted a broad principle for inclusion which recognises ownership and other indicators of control including the dependency on public funding (paragraphs 1.6 to 1.9).

We found:

• The 2,591 Academy Trusts are companies limited by guarantee, under the Companies Act 2006. They receive the majority of their funds from central government. The government does not own these companies. They are operationally independent with their own boards of directors and accounting officers, and operate on a not for profit basis. By 31 March 2015, the number of Academy Trusts had increased to 2,634 (Figure 9 on page 23).

• The 218 parent companies and their 229 subsidiaries are distributed widely across all 17 central government departments. In total 39% of the companies identified are listed in at least one of the ONS, Cabinet Office and Treasury sources (84 out of 218, leaving 134 companies not included). The majority (138 out of 218) are private companies limited by shares under the Companies Act. The number of subsidiaries is likely to be an underestimate as we only identified the first line of subsidiaries (paragraphs 2.17 to 2.19).

8 Annual reports and accounts published by each of the 17 departments do not always provide a full list of companies. In total, 139 companies are identified across the 17 departmental annual report and accounts, leaving one third of the companies (79 out of 218) undisclosed. Seven of the 17 departments identify all of the companies that we have included in the departmental mapping. Figure 2 overleaf compares the total number of companies disclosed in the annual report to the full departmental mapping of companies in government (Part Five).


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9 There is no set approvals process for forming a company in government. There are clear approvals processes for public bodies and alternative models such as public service mutuals. There is no central guidance on when a company is the most appropriate form of new body (paragraphs 3.2 to 3.4 and Figures 10 and 11).

10 There has been an increase in the number of companies in government at the same time as a reduction in the number of public bodies. Since 2010 and 31 March 2014, the number of public bodies has been reduced by 285. In the same period 11 new non-departmental public bodies (NDPBs) were created as well as 173 new organisations not classified as public bodies, of which 66 are companies (this analysis excludes the 2,591 Academy Trusts, and includes 21 Community Rehabilitation Companies which have since been sold although government retains a special share) (paragraphs 3.6 to 3.8 and Figure 12).

11 The current accountability system does not reflect the differences between a public body that is incorporated (as a company, Royal Charter or statutory corporation) or not incorporated. Managing Public Money applies to all central government bodies including those that are companies in government. Government corporate governance guidance, such as Corporate Governance in Central Government Departments: Code of Good Practice focuses on ministerial departments but is relevant to those arm’s-length bodies (ALBs) which are also companies in government (paragraphs 4.4 to 4.16 and Figures 13 to 15).7,8

7 HM Treasury (2013), Managing Public Money. Available at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/454191/Managing_Public_Money_AA_v2_-jan15.pdf

8 HM Treasury and Cabinet Office (2011), Corporate governance in central government departments: Code of good practice 2011. Available at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/220645/corporate_governance_good_practice_july2011.pdf

10 Part One Companies in government

Part One

Concepts

1.1 This section introduces the definitions and concepts concerning companies in government that we use throughout this report.

The types of company referred to in this report

1.2 ‘Companies in government’ is an umbrella term we have defined to cover the range of corporate forms and means of ownership and control that we observe across government.

1.3 Companies in government take various corporate forms (see Appendix Two). The most common are limited companies incorporated and registered under the Companies Act 2006. The most frequently used of that type are:

• Private company limited by guarantee. The liability of the owners (members) on winding up the company is limited to the (usually nominal) amount stated in the company’s articles. It is commonly used for not-for-profit companies;

• Private company limited by shares. The liability of its owners (the shareholders) is limited to the amount, if any, unpaid on the shares which cannot be publicly traded. Shares in government companies are typically owned by the Secretary of State and have a nominal value of £1.

1.4 Companies in government also use special corporate forms:

• Companies incorporated by Royal Charter. A Royal Charter is a way of incorporating a body, that is, turning it from a collection of individuals into a separate legal entity. A body incorporated by Royal Charter has all the powers of a natural person, including the power to sue and be sued in its own right.9 These have no shares or members and are created by Royal Charter which sets out the terms of operation.

• Companies created by legislation. These are also called statutory companies or corporations. They are created by bespoke legislation and have no shares or members.

9 Privy Council Office Information on Chartered bodies. Available at: http://privycouncil.independent.gov.uk/royal-charters/chartered-bodies/

Companies in government Part One 11

1.5 Some companies in government are ‘Public Corporations’, a statistical classification which ONS applies. Not all companies in government are Public Corporations (paragraph 2.7 to 2.9).

Ownership and control

1.6 This report identifies companies which central government wholly or partially owned or controlled in the 2013-14 financial year. Companies wholly or partially owned are generally companies limited by shares where government owns all or some of the shares.

1.7 Government controlled companies are companies limited by shares or guarantee where government is a member and/or where it exerts control by:10

• being able to appoint, approve or remove directors;

• providing funding, with rights of control over how that funding is spent;11

• owning a share conferring special rights;12 or

• being able to set or constrain corporate policy.

Definitions of a company and a public body

1.8 A company is a voluntary association of individuals incorporated by registration, usually created to conduct business, to become a separate legal entity from its owners. It has the full legal powers of an individual, for example to enter into contracts, raise funds, incur liabilities and employ staff. It is accountable to its owners but their liability for what the company does is limited. Companies in government which are incorporated under the Companies Act 2006 (Companies Act) have equivalent legal status whether they are in the public sector or in the private sector.

1.9 A public body (also known as an arm’s-length body (ALB)) is sponsored by a central government department and operates within the terms of a framework document agreed with the department. A public body is accountable through the accounting officer (AO) to the Secretary of State for the department and then to Parliament. Public bodies are categorised or classified according to their function and characteristics rather than legal form. Public bodies can be incorporated as companies and if incorporated under the Companies Act have equivalent legal status to companies in the private sector. Figure 3 on page 14 sets out the categories of public bodies in central government.

10 We used a test of control based on the test of control for merger control purposes (see Enterprise Act 2002 s. 26). This test allows for actual control based on majority share ownership, and control of policy or ability to materially influence corporate policy with a minority or no share ownership.

11 Companies that depend on public money to operate could present a risk to the taxpayer if the company fails as the taxpayer is likely to have to bear the cost of replacing the service they offer.

12 These companies are generally regarded as being in the private sector.

12 Part Two Companies in government

Part Two

Measurement

2.1 This section explains the scope of the five public sources of information we used to identify companies in government and compares the results of each. Each source is designed for a specific purpose and does not seek explicitly to identify or provide information on whether a body has company status. It also summarises a sixth source – a full departmental mapping – which expands on all of the other sources.

Summary of sources

2.2 The five public sources are:

• Central sources:

• Public Bodies Data Directory, which Cabinet Office prepares;

• Public Sector Classification Guide, which the Office for National Statistics maintains;

• Whole of Government Accounts, which HM Treasury prepares;

• Companies House:13

• The official register of UK companies incorporated and registered under the Companies Act.

• Departmental sources:

• Annual reports and accounts prepared by 17 central government departments.

13 We could not use the register to identify companies in government because there was no common search term we could use. Once we identified companies we used the register to verify their form.

Companies in government Part Two 13

2.3 We used these sources, and our own primary research, to produce our own map of companies in government by department (Part Five). We identified 3,038 companies in government: 218 parent companies, 2,591 Academy Trusts and 229 first line subsidiaries (see Figure 7 on page 19). This analysis seeks to assess companies in government as at 31 March 2014. The landscape is subject to change and significant changes after this date are noted later in this part (paragraph 2.20).

2.4 A comparison between these sources showed:

• 12% of companies in government appear in all three central sources (27/218);

• 13% of companies in government appear in just one of these three central sources (29/218);

• 62% of companies in government are not included in any of these three central sources (134/218);

• 38% of companies in government appear in at least one of the three central sources (84/218); and

• 97% of companies in government are included in the Companies House register (211/218).

The number of companies recorded in each information source

Source 1: Public Bodies Data Directory

2.5 The Public Bodies Data Directory (PBD) lists certain public bodies (non-departmental public bodies (NDPBs), Executive Agencies (EAs) and non-ministerial departments (NMDs) operating at arm’s length from their sponsoring departments. It does not seek to provide a comprehensive listing of all public bodies. Cabinet Office produces it to improve transparency and accountability of public bodies and to provide an annual update on public body reform.14

14 Cabinet Office (2014) Public Bodies 2014, p 5. Available at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/387312/Annex_A_-_PB14_Report_121214.pdf


2.6 The PBD lists public bodies by department and administrative category but does not separately identify which of these are companies. It lists the name of the entity and gives details about it. From this information we were able to identify which of these public bodies were also companies in government. Some public bodies are also companies if they have been incorporated under the Companies Act or by other means (see paragraph 1.4). According to the PBD there are 28 companies in government of the categories of public bodies that it covers: all 28 are categorised as an NDPB and one is classified as both an NDPB and Public Corporation (Figure 3).

Figure 3Public bodies directory: administrative categories and number of companies in government

Type Legal status Accountability Function Funding Number of companies1

Non-ministerial department (NMD)

Not a separate legal entity

To Parliament through sponsoring minister and Accounting Officer

Performs a specific statutory function

Estimate voted by Parliament

0

Executive Agency (EA) Not a separate legal entity. Business unit within a department


Service delivery function within policy set by ministers

Included in Departmental Estimate

0

Executive Agency – Trading Fund (EATF)

Not a separate legal entity. Statistical classification of Public Corporation in National Accounts


Commercial function and charge for goods or services

Generates at least 50% of income from commercial activities; government is lender of last resort

0

Non-departmental public body (NDPB)2

Separate legal entity and subject to triennial reviews


Administrative, commercial, executive or regulatory function which may be set out in statute and best delivered at arm’s-length

Included in Department’s estimate or funded by sectoral levies

28

Public Corporation3 Separate legal entity only if incorporated

To Parliament through Sponsoring minister and Accounting Officer

Market body performing a commercial function

At least 50% of costs are met from income from sales of goods or services

1 of the 28 above [Remploy Ltd]

Notes

1 Companies in government includes Companies Act 2006 companies, Royal Charter companies, statutory corporations.

2 Non-departmental public body (NDPB) includes executive, advisory and tribunal NDPBs.

3 Public Corporation is a statistical classifi cation, and not an administrative category.

Source: Cabinet Offi ce (2012) Categories of Public Bodies: A Guide for Departments and Cabinet Offi ce, Public Bodies 2014 Data Directory, 10 November 2014


Source 2: Public Sector Classification Guide

2.7 The ONS classifies organisations according to categories set out in the 2010 European System of Accounts.15 The Public Sector Classification Guide lists those bodies the ONS has classified as public sector bodies for national accounts purposes.16

2.8 The ONS classifications are separate from the categories in the PBD and the process does not separately identify companies in government. The classification process at 31 March 2014 is outlined in Figure 4 overleaf.

2.9 We checked the ONS Public Sector Classification Index and identified 69 companies in government (Figure 5 on page 17).

Source 3: Whole of Government Accounts

2.10 The Whole of Government Accounts (WGA) are the consolidated financial statements for the whole of the UK public sector (central and local). It shows what the UK government spends and receives and what it owns and owes. It is produced annually by HM Treasury and audited by the Comptroller and Auditor General (C&AG). The WGA uses the statistical classifications produced by the ONS but does not distinguish between financial and non-financial public corporations.

2.11 The WGA lists the entities which are consolidated to form the accounts in Annex 1 of the WGA.17 The entities to be included in the WGA are notified annually in the Whole of Government Accounts (Designation of Bodies) Order18 which HM Treasury prepares. We reviewed the WGA for the 2013-14 financial year and identified 69 companies in government (Figure 6 on page 17). The departmental accounting boundary determines which entities are consolidated in the WGA and subsequently disclosed in the accounts. The departmental boundary is similar to the concept of a group under generally accepted accounting practice, but is based on the control criteria used by the ONS to classify the relevant sponsored bodies.19 Any body classified as a Public Corporation by the Office for National Statistics (which includes trading funds) is outside the departmental accounting boundary.20

15 ONS (2014) About the Public Sector Classification Guide.16 ONS UK national accounts and public sector finances sector and transaction classification: the classification process.

Available at: www.ons.gov.uk/ons/guide-method/classifications/na-classifications/the-ons-classification-process/index.html17 HM Treasury Whole of Government Accounts March 2014. Available at: www.gov.uk/government/uploads/system/

uploads/attachment_data/file/419973/PU1786_WGA_2013-14_Accounts.pdf18 Available at: www.legislation.gov.uk/uksi/2014/2234/contents/made19 Government Financial Reporting Manual 2014-15, paragraphs 4.1.3. Available at: www.gov.uk/government/uploads/

system/uploads/attachment_data/file/388182/FReM_2014-15_final_version_3_for_December_2014_publication.pdf20 Government Financial Reporting Manual 2014-15, paragraphs 4.1.6. Available at: www.gov.uk/government/uploads/

system/uploads/attachment_data/file/388182/FReM_2014-15_final_version_3_for_December_2014_publication.pdf


Figure 4Offi ce for National Statistics (ONS) classifi cation process

Control test

Market participant test

Does the government exercise significant control over the general corporate policy of the unit?

Private sector

Public sector

Note

1 Public fi nancial corporations are subdivided into Central Bank, Financial Auxiliaries, Insurance Corporations & Pension Funds, Monetary fi nancial Institutions and other fi nancial intermediaries.

Source: Offi ce for National Statistics UK National Accounts and public sector fi nances sector and transaction classifi cation process. Available at: www.ons.gov.uk/ons/guide-method/classifi cations/na-classifi cations/the-ons-classifi cation-process/index.html

The ONS classifies ‘institutional units’ in the UK economy for national accounts purposes

No

Yes

Indicators of Control

Primary

Directors appointment and dismissal rights

Ownership of voting rights

Ownership of share conferring special rights

Secondary

Special terms in company constitutional documents

Funding agreements

Indemnities

Dominant customer

Market body Non-market body

Financial services activities

Public non-financial corporation

Public financial corporation

Central government Local government

Yes

Yes

No

No

Is more than 50% of production costs recouped through sales revenues at economically significant prices over a sustained period (3 years or more)


2.12 Where a department has an investment in another public sector entity that does not meet the criteria for consolidation, it should be reported following the requirements of IAS 39 (recognition and measurement of financial instruments). This includes all interests in bodies classified as public corporations by the ONS, which are within the scope of Managing Public Money principles.21

Source 4: Companies House

2.13 Companies House maintains the official government register of UK companies incorporated and registered under the Companies Act.22 Of the 218 companies in government that the NAO identified, 211 are on the register. The remainder are not incorporated and registered under the Companies Act 2006.

21 Paragraph 4.1.4, available at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/388182/FReM_2014-15_final_version_3_for_December_2014_publication.pdf

22 At 31 March 2014 the number of companies was 3,250,300. Available at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/380779/CompaniesRegisterActivities2013-2014.pdf

Figure 5Public sector classifi cation guide, March 2014

Classification Number of companies

Central government 51

Public non-financial corporation 13

Public financial corporation 5

Total 69

Note

1 www.ons.gov.uk/ons/datasets-and-tables/index.html?pageSize=50&sortBy=none&sortDirection=none&newquery=public+bodies+directory+-+MARCH+2014

Source: Offi ce for National Statistics

Figure 6Whole of government accounts: number of companies identifi ed

Classification Number of companies

Central government 56

Public Corporations (financial and non-financial) 13

Total 69

Source: HM Treasury, Annex A, Whole of Government Accounts 2013-14


Source 5: Departments’ Annual Reports and Accounts

2.14 Departmental annual reports and accounts do not always list all companies owned or controlled by the department. The Government Financial Reporting Manual (FReM), the technical accounting guide to the preparation of financial statements, requires departments to list all entities within the departmental boundary. This boundary does not necessarily include all the companies in government we have identified. Departments disclose investments including interests in companies in accordance with accounting standards but are not required to disclose the extent of the interest in a company investment.

2.15 We checked the 2013-14 Annual Report and Accounts to see how many of the companies in government we have identified have been disclosed. Seven out of 17 departments disclosed all of the companies in government we had identified somewhere in their annual report, although not necessarily in one place or with additional information on the nature of the company or the relationship to the department. In total 79 out of 218 companies were not set out in the annual report for the relevant department. Figure 2 on page 8 sets out our findings by department.

Source 6: Departmental mapping

2.16 The NAO used the sources listed above and individual company accounts to identify 218 companies in government of which 41 are dormant and their 229 first line subsidiaries. These are included in the departmental maps of companies in government (Part Five).

2.17 We identified a total of 3,038 companies wholly or partially owned or controlled by government in the 2013-14 financial year. This included 2,591 Academy Trusts which were not included in the departmental maps.

2.18 The results of the NAO’s identification are summarised in Figure 7, which shows the number of companies we have identified for each department and their legal form.

Increase in the number of companies since 2010

2.19 In the period 2010–2014, 66 new companies were formed. Of these, 21 were Community Rehabilitation Companies, nine DFT companies have been dormant since creation and ten have been identified as financial institutions.23 In addition, 2591 Academy Trusts were created using the form of a company limited by guarantee.24 Figure 8 on pages 20 and 21 shows the number of new companies in each department. Part Five contains further details of each new company.

23 For more detailed examination of financial institutions in government see NAO (2015) Financial Institutions Landscape.24 Academy Trusts operate under the Academies Act 2010. Section 12 of this Act specifies that Academy Trusts are

companies limited by guarantee and are charities. An Academy Trust may operate one Academy school, or a number of schools, when they are known as a Multi-Academy Trust.


Figure 7Number of companies in government by department 2013-141

Department Private limited by

shares

Private limited by

guarantee2

Public plc Statutory³ Total Of which, special share4

Department for Culture, Media & Sport 26 5 0 4 35 0

Department for Business, Innovation & Skills

8 3 6 8 25 3

Department for Transport 20 8 2 1 31 1

Department of Energy & Climate Change 11 3 1 0 15 1

Ministry of Justice 21 0 0 0 21 0

Department for Environment, Food & Rural Affairs

4 12 0 0 16 0

Ministry of Defence 14 2 1 0 17 5

Department for Communities and Local Government

10 5 0 0 15 1

HM Treasury 7 5 2 1 15 0

Department of Health 7 1 0 0 8 0

Cabinet Office 4 1 0 0 5 0

Department for Work & Pensions 1 2 0 1 4 0

Department for Education 2 1 0 0 3 0

Foreign & Commonwealth Office 1 2 0 0 3 0

Home Office 1 2 0 0 3 0

Department for International Development 0 0 1 0 1 0

HM Revenue & Customs 1 0 0 0 1 0

Total 138 52 13 15 218 11

Academy Trusts 2,591 2,809

Notes

1 Does not include subsidiaries.

2 Includes those ‘exempt from using limited’.

3 Includes companies incorporated by Royal Charter, See Appendix Two for more detail. Available at: http://privycouncil.independent.gov.uk/royal-charters/chartered-bodies

4 Companies where a government holds a special share.

Source: National Audit Offi ce


Figure 8Year of formation of companies in existence in the 2013-14 financial year

Source: National Audit Office review of company records

220

210

200

190

180

170

160

150

140

130

120

110

100

90

80

70

60

50

40

30

20

10

0

Pre 19

7019

70s

1980

s19

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

14

Yearly

Cumulative

10

19

4 4 4 42 21

13 13 13

5 5

11 11

32

36 6 7 8 6 6 8 87

218

152


Figure 8 continuedYear of formation of companies in existence in the 2013-14 financial year

Notes

1 All nine DfT companies are dormant. All 21 MoJ companies are community rehabilitation companies.

2 MoJ = Ministry of Justice; DfT = Department for Transport; BIS = Department for Business, Innovation & Skills; CO = Cabinet Office; DCMS = Department for Culture, Media & Sport; HMT = HM Treasury; DECC = Department of Energy & Climate Change; HO = Home Office; DCLG = Department for Communities and Local Government; Defra = Department for Environment, Food & Rural Affairs; DWP = Department for Work & Pensions; FCO = Foreign & Commonwealth Office; MoD = Ministry of Defence.

Source: National Audit Office analysis

MoJ

25

20

15

10

5

0DfT BIS CO DCMS HMT DECC DoH HO DCLG Defra DWP FCO MoD

This graph represents the 66 companies incorporated from 2010–2014 by their respective department


Developments since 31 March 2014

2.20 The report was prepared using information at 31 March 2014. A summary of key changes to companies is set out in Figure 9.

Figure 9Summary of developments since 31 March 2014

Department Recent developments

Department for Education (DfE) The number of Academy Trusts increased to 2,634.

Ministry of Justice (MoJ) Despite the sale of the 21 Community Rehabilitation Companies (CRCs), they remain under government control with the Secretary of State for Justice holding one special share in each. The ONS has reclassified the CRCs to the private sector effective 1 February 2015. The proceeds from this disposal process were £365,000, the value of net assets in each of the CRCs as at that date.

Department for Business, Innovation & Skills (BIS)

Ordnance Survey was incorporated on 8 July 2014 with shares 100% owned by the Secretary of State for BIS. It was then vested and a new company began operations on 1 April 2015.

Department of Health (DoH) Dr Foster Intelligence Ltd was sold as of 25 March 2015.

Home Office College of Policing Ltd ownership has been relinquished as of 22 April 2015.

Department of Energy & Climate Change (DECC)

NDA Archives Ltd was incorporated on 1 July 2014.

INS Rokkasho KK(Japan) Ltd was liquidated on 22 January 2015.

Ministry of Defence (MoD) A special share has been acquired in CLH Pipeline System (CLH-PS) Ltd as of 30 April 2015.

Admiralty Hydrographic Asia Pacific Pte Ltd was dissolved on 14 July 2015.

Department for Transport (DfT) The government sold its shares in Eurostar for £757.1 million.

Network Rail has been included in the ONS public sector classification as a result of changes to the European System of Accounts. The change came into effect on 1 September 2014.

The Highways Agency, an executive agency, became Highways England, a company, in April 2015.

Department for Work & Pensions (DWP)

The government sold the majority of Remploy’s operations and the brand as a subsidiary company, also called Remploy. A private company now owns the majority and an employee trust has a minority holding. DWP manages some residual liabilities via the original company, now renamed Disabled People’s Employment Corporation (GB) Ltd.

Notes

1 The fi gures for academy trusts is taken from our Short Guide to the Department for Education. Available at: www.nao.org.uk/wp-content/uploads/2015/08/Department-for-education-short-guide.pdf. We have previously reported on the Academies Programme, available at: www.nao.org.uk/wp-content/uploads/2010/09/1011288.pdf

2 Proceeds from the sale of the Community Rehabilitation Companies is taken from the Ministry of Justice’s Annual Report and Accounts 2014-15.

3 Proceeds from the sale of Eurostar is taken from HM Treasury’s Annual Report and Accounts 2014-15.

Source: National Audit Offi ce analysis of departmental accounts and public records

Companies in government Part Three 23

Part Three

Formation

3.1 This section describes the process of creating arm’s-length public bodies (ALBs) and the circumstances in which they may be incorporated as companies, Royal Charters or statutory corporations. It also describes the public bodies reform programme.

Creation of a new public body

3.2 We reviewed the process for creating a new public body, and how this related to companies in government. Currently, “the government’s presumption is that if a public function is needed then it should be undertaken by a body that is democratically accountable at either national or local level.”25

3.3 Creation of a new public body involves:

• the department concerned;

• the ONS, to assess the statistical classification of the new body once it has been set up;26

• the departmental and HM Treasury Spending Team if doing something ‘novel or contentious’, or if significant expenditure is involved;27 and

• the Cabinet Office Public Bodies Reform Group (PBRG) on the administrative category.

25 As seen on the Cabinet Office’s Public Bodies Reform Guidance. Available at: www.gov.uk/guidance/public-bodies-reform. This refers to the 2010 Public Bodies Reform Programme and the Cabinet Office are in the process of updating their ALB reform strategy.

26 The ONS may provide provisional classification advice on how a proposed body would be classified if set up as described to ONS but does not proactively seek this involvement and would provide the advice only if it is sought by a ‘policy proposal’ being brought forward. The ONS will only answer questions of the form ‘we plan to do this, how will it be classified?’. The ONS does not advise on how something should be structured to achieve a certain classification.

27 See Cabinet Office (2015) Cabinet Office controls guidance: version 4.0, (2010) Approval process for the creation of non-departmental public bodies, HM Treasury Managing Public Money. Categories of Public Bodies: A Guide for Departments. December 2012. The category of the entity also has an effect, for example the UK government recently told the OECD that generally the commercial operations of NDPBs are undertaken to support strategic goals rather than for profit. See OECD (2015) State Owned Enterprise Governance. Available at: www.oecd-ilibrary.org/governance/state-owned-enterprise-governance_9789264239944-en, A Stocktaking of Government Rationales for Enterprise Ownership, Box 1.2.

24 Part Three Companies in government

3.4 In order to create a new non-departmental public body (NDPB), one or more of the following three tests must be satisfied:28

• Does it perform a technical function that could not be delivered in a department?

• Does its activities need to be, and be seen to be, delivered with absolute political impartiality?

• Does it need to act independently of ministers to establish facts and/or figures?

3.5 The Commercial Models team within the Cabinet Office advises on alternative ways of delivering services rather than through either public bodies or existing private sector suppliers; this includes creating new private sector suppliers such as public service mutuals and public-private joint ventures. These alternative models are not subject to the approvals process for public bodies (Figure 10) unless they are in particular category of public body.

28 Available at: www.gov.uk/public-bodies-reform

Figure 10Approval process for public bodies

Category Approval process

Non-ministerial department Cabinet Office, HM Treasury ministers and then the Prime Minister. Needs exceptional business case and generally established by statute.

Executive Agency Cabinet Office and HM Treasury ministers. Requires value for money (VfM) case supported by fully-costed business case.

Executive Agency Trading Fund Cabinet Office and HM Treasury ministers. Order laid in Parliament under the Government Trading Funds Act 1973.1

Executive non-departmental public body (NDPB)

Cabinet Office and HM Treasury ministers. Needs fully-costed business case establishing need for the body and the function and must satisfy one of the three tests. Established as a last resort.

Advisory NDPB Same as Executive NDPB. Cabinet Office ministers. Established as last resort.

Tribunal NDPB No longer used as new appeal rights are administered by the First Tier Tribunal.

Note

1 All Executive Agency Trading Funds are Public Corporations but not all Public Corporations are Trading Funds. Trading Funds are anomalous in being outside Central Government for national accounts purposes but in general being legally part of their sponsoring department.

Source: Categories of Public Bodies: A Guide for Departments. December 2012


3.6 Cabinet Office told us depending on the purpose for which government forms a company, various approval processes may apply. When government incorporates a company, it is to do one or more of the following things:

• create a new NDPB (which requires Cabinet Office Public Bodies Reform Team approval);

• create any new organisation, including (but not limited to) a spin-off from central government, joint venture, public corporation, charity, public service mutual, or social enterprise (which requires Cabinet Office Commercial Models Team approval);

• spend a significant sum of money (which requires HM Treasury approval or Departmental Finance Team approval, depending on the level of spend versus delegated limits); or

• do something that sets a precedent, is novel, contentious or could cause repercussions elsewhere in the public sector (which requires HM Treasury approval).

3.7 Approval by Commercial Models and HM Treasury (or the Departmental Finance team if the anticipated level of spend is below the delegated limit and it is deemed not to be novel or contentious) is based on a business case.29

3.8 As set out in Part Two, we found only 28 companies in government which had a public body categorisation, and 190 out of 218 companies have no public body category.

3.9 Figure 11 on pages 26 and 27 sets out the pathways for a new public body to be incorporated as a separate legal entity.

Public bodies reform policy

3.10 The public bodies reform policy aims to rationalise the number of public bodies operating at arm’s length from government, increase the accountability of those remaining, explore new innovative models and, through triennial reviews, ensure remaining public bodies continue to be the best mode of delivery.

3.11 Between 2010 and 2014, the Cabinet Office oversaw a reduction in the number of public bodies of 285. During the same period 17330 new bodies were set up: 66 companies, 96 public service mutuals and 11 NDPBs,31 (Figure 12 on page 28).

3.12 The triennial reviews of NDPBs involves “questioning whether they should remain as an NDPB, close or be reformed”, and “making sure the highest standards of governance are upheld”.32 However these reviews are only carried out on those organisations with public body categorisations. There is no similar programme to review functions delivered by bodies without these categorisations.

29 Available at: https://www.gov.uk/government/publications/the-green-book-appraisal-and-evaluation-in-central-government30 This figure excludes the Academy Trusts.31 Between May 2010 and June 2014, the government established and classified 12 new NDPBs which were not

previously in existence in another form, including seven independent monitoring boards (which must be set up whenever a new prison or immigration holding centre is established, while 19 during this time have closed or merged).

32 Both quotes are taken from the government’s policy paper on government service reform. Available at: www.gov.uk/government/publications/2010-to-2015-government-policy-government-service-reform/2010-to-2015-government-policy-government-service-reform#appendix-3-reforming-public-bodies-to-make-them-more-efficient-and-effective


Figure 11Pathways for a new public body to be incorporated as a separate legal entity



Government control test Public sector Market test

Arm’s-length body

Non-ministerial department

General executive agency or Trading Fund Executive Agency (within a department)

Non-departmental public body (Executive, Advisory, Independent Monitoring Board)

Others

Statutory corporation

Channel 4

Royal Charter

Bank of England

Companies Act 2006 Company Limited by Guarantee

For example, Start Up Loans Company

Companies Act 2006 Company Limited by Shares

For example, Student Loans Company




Department

Arm’s-length tests

The Office for National Statistics classification process (see Figure 4)

Yes No

The Cabinet Office categorises central government organisations for administrative purposes

Yes No

What is the appropriate legal structure? (not all the legal structures below will be appropriate for all the categories above)


-8 11

2145

96

-300

-250

-200

-150

-100

-50

0

-277

Public bodies(PB)

analysis of public bodies

PB’s which areCompanies/Public

Corporations

NDPB CRC Companies Public ServiceMutuals

Figure 12Changes in the number of public bodies since 2010

Notes

1 The Cabinet Office told us it believes this graph is misleading because it aggregates figures for dissimilar bodies. It compares some types of public body and some types of contracted service, some of which are provided at national level and some locally. As such the Cabinet Office believes that the graph does not make proper distinction between different types of organisations and as a consequence gives a distorted picture of changes to the service provision landscape.

2 According to the Cabinet Office the eight government-owned companies or public corporations that were merged or abolished were not NDPBs. The organisations concerned are: Audit Commission for Local Authorities and the National Health Service in England, BRB (Residuary) Ltd, British Nuclear Fuels Limited, British Shipbuilders, British Waterways, Forensic Science Service, General Teaching Council for England, Horserace Totalisator Board.

Source: National Audit Office analysis of public bodies

1

Companies in government Part Four 29

Part Four

Governance and accountability

4.1 This section describes some of the key relationships between departments and companies; how principles of public accountability are combined with corporate governance arrangements; and compares the approach to assurance of public bodies to assurance of companies in government. We looked at the existing arrangements, not how each department implemented those.

Description of the relationship between departments and companies

4.2 The government’s corporate portfolio is widely distributed across government. All 17 central departments have interests in companies, which may take various forms:

• Direct relationship between a department and company, as a subsidiary or investment. For example, the Department for Transport (DfT) owns Directly Operated Railways Ltd; the Department of Health (DoH) owns NHS Property Services Limited.

• Indirect relationship, through a specialist asset management company. For example, UK Financial Investments Limited (UKFI) was established in 2008 to manage the government’s shareholdings in Royal Bank of Scotland (RBS), Lloyds Banking Group and UK Asset Resolution Limited (UKAR). UKFI operates under a framework document and is a signatory to the FRC Stewardship code. In addition, there is an investment mandate which states;

• In relation to RBS and Lloyds it will follow “best institutional shareholder practice” including the Institutional Shareholders’ Committee’s statement of principles, and the Walker review;

• In relation to wholly-owned companies, UKFI will engage with UKAR in a manner “similar to that in which a financial sponsor would engage with a wholly-owned portfolio company”.

• Joint relationships. The ownership and governance of some companies in government is shared between departments. For example, the Secretary of State for Business, Innovation & Skills (BIS), the Minister for Employment and Learning, Northern Ireland, the Minister for Education and Skills, Welsh Government and the Scottish Ministers jointly own the Student Loans Company Limited, and the Department of Energy and Climate Change (DECC) owns the Low Carbon Contracts Company, but both DECC and BIS provide board members.

30 Part Four Companies in government

4.3 The relationship between a company and a department can be complex and multifaceted. For example, a department can be a shareholder (ie provider of equity capital), lender (ie debt capital), or a guarantor. It may be a major, or the only customer (providing a source of revenue), and it may be a supplier of goods, services or personnel (for which it may be remunerated). It may exercise control or influence directly by appointing directors, or indirectly, for example through a specialist unit such as the Shareholder Executive.33

Role of the accounting officer

4.4 The accounting officer (AO) is the individual with personal responsibility for public money in each public body, including companies in government. Where a department has an interest in a company there may be more than one involved. For example, the DfT’s ownership of Directly Operated Railways Ltd involves two AOs – one for the department, and one for the company. HM Treasury’s ownership of RBS involves three AOs – the department, RBS, and UKFI. The Department for Education’s Academy Trusts involves three AOs – the department, the Education Funding Agency (who pass agreed grants to the Academy Trust) and the individual Academy Trust, which might operate one or many academies.

4.5 The responsibilities of an AO are not the same as the responsibilities of a company director, as shown in Figure 13. The main difference is that an AO has personal responsibilities and a company director has collective and personal responsibilities enforceable under law.

4.6 Company directors (the board) act collectively within the powers conferred by the company constitution (Articles of Association) and the owners to manage the company on behalf of the owners. The board is collectively responsible to the owners for ensuring the company complies with all relevant legislation and directors fulfil their duties.

4.7 Individual company directors (including directors of companies in government) owe duties to the company which are set out in Part 10 of the Companies Act and are enforceable by owners on behalf of the company.34 A director is also required to comply with a wide range of sectoral and other legislation for example the Insolvency Act 1986, the Health and Safety at Work Act 1974 and the Corporate Manslaughter and Corporate Homicide Act 2007. Although the responsibilities of the AO and company director might overlap, there is an assumption, but no specific requirement, that the AO of a company in government is also a director.35 Managing Public Money recognises that there are ‘sensitivities’ about the role of an AO in a company, and that conflicts may arise but does not explain how to resolve them.36

33 The Shareholder Executive (ShEx) is a unit within the Department for Business, Innovation & Skills established in 2003 to centralise shareholding expertise within government.

34 Companies Act 2006 Part 10, Chapter 2.35 Managing Public Money 3.3.2 states: “The accounting officer of a corporate arm’s length body should arrange for a

board member to sign the accounts as well as signing them himself or herself, if (unusually) he or she is not a member of the board”.

36 Managing Public Money 3.8.5 states: “There are sensitivities about the role of the accounting officer in an arm’s length body (ALB) which is governed by an independent board, eg a charity or company. The ALB’s accounting officer, who will normally be a member of the board, must take care that his or her personal legal responsibilities do not conflict with his or her duties as a board member. In particular, the accounting officer should vote against any proposal which appears to cause such a conflict; it is not sufficient to abstain”.


Figure 13Accountability: differences between a non-departmental public body (NDPB) and a company

Non-departmental public body Company1

Who is accountable Permanent head Chairman of the board or chief executive

Method of appointment Departmental principal accounting officer (PAO) Directors or shareholders

Line of Accountability PAO, minister and Parliament Shareholders

Personal responsibilities Managing public money:

• Governance statement

• Regularity and propriety

• Affordability and sustainability

• Value for money

• Control

• Management of opportunity and risk

• Accounting accurately for the organisation’s financial position

Individual statutory duties:2

• promote the success of the company;

• act within powers;

• exercise independent judgement;

• exercise reasonable care, skill and diligence;

• avoid conflicts of interest;

• do not accept benefits from third-parties; and

• declare interests in proposed transactions or arrangements

Collective responsibilities Board’s collective responsibilities:3

• preparation of annual report and accounts;

• reporting on a going concern basis and disclosure of material uncertainties;

• setting culture and reward systems;

• determining the company’s risk appetite and ensuring appropriate risk management/mitigation and internal control systems are in place;

• establishment of an audit committee and its terms of reference; and

• appointment of senior management

Notes

1 Company outside of government.

2 General and fi duciary duties of directors Companies Act 2006, Part 10, Chapter 2 ss.171–177.

3 The directors act collectively. Companies Act 2006, Part 15 Chapter 4, The company’s Articles will set out the scope of the board’s responsibility. These are taken from the Model Articles, The Companies (Model Articles) Regulations 2008 (S.I. 2008/3229). Available at: www.opsi.gov.uk/si/si2008/pdf/uksi_20083229_en.pdf

4 For companies in government arrangements are in practice a combination of those in the table, generally with an AO appointed and a framework document ensuring appropriate arrangements are in place.

Source: HM Treasury, Managing Public Money; Companies Act 2006; UK Code of Corporate Governance; Model Articles


Sponsorship

4.8 Sponsorship refers to the link between departments and their ALBs. Departments are expected to play an active role in the governance, financial management, risk management and performance monitoring of ALBs and are responsible for managing the relationship with an ALB on behalf of the minister and the AO.37

4.9 Current sponsorship guidance does not specifically address the relationship between departmental sponsors and companies in government nor other specific forms of arm’s-length bodies.

Review of corporate governance guidance

4.10 We reviewed various documents that provide guidance about governance in the public sector and other corporate governance guidance that applies in the private sector. We also set out the specific arrangements in a small sample of companies in government (Appendix Three).

4.11 Managing Public Money states each public sector organisation should establish governance arrangements that combine efficient decision-making with accountability and transparency.38 There is no specific guidance for governance of companies in government but a range of governance codes and principles are relevant (Figure 15). These include a few specific references to ‘companies’:

• The primary public sector governance resource, Corporate Governance in Central Government Departments: Code of Good Practice (the Code of Good Practice)39 states that when an arm’s-length body is a company, one lever of control which the department’s AO may use to influence the AO of the arm’s-length body is the shareholder vote. However this should only be used “in extremis”.40

• The guidance Principles of Good Corporate Governance in Executive Non Departmental Bodies (the NDPB Code) states for NDPBs established as companies, or which have charitable status, the public body must also be fully compliant with relevant statutory and administrative requirements.41

37 Civil Service (2014) Introduction to Sponsorship: An Induction Pack for new Sponsors of arm’s length bodies. p14.38 Managing Public Money 4.1.1.39 Available at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/220645/corporate_governance_

good_practice_july2011.pdf40 Corporate governance in central government departments, Code of good practice 2011 – Guidance Note. Paragraph

5.6 states: “A departmental AO should be prepared to use the mechanisms for ensuring AOs in the department’s ALBs fulfil their AO responsibilities. In extremis, these might include: exercising shareholder or guarantor control if the ALB is a company; withdrawal of the delegated AO’s responsibilities in the ALB. Source available at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/220646/corporate_governance_good_practice_guidance_july2011.pdf

41 Principles Of Good Corporate Governance In Executive NDPBs.


4.12 Governance arrangements for companies in government are complex, based on many difference codes (Figure 14). Framework documents42 between the department and the company may set out additional requirements such as compliance with elements of the private sector UK Code of Corporate Governance (the UK Code)43 which apply to smaller unlisted companies. The Civil Service Code44 sets out the standards of behaviour expected of civil servants. This also applies to civil servants acting as directors of companies in government but not to other directors or company employees.

42 A framework document sets out the arrangements to monitor the performance of an arm’s-length body (Managing Public Money Annex 7.2).

43 www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf44 www.civilservice.gov.uk/about/values

Figure 14Governance resources relevant to companies in government

Governance resources Private company limited by shares or guarantee (Ltd)

Public company limited by shares

(Plc)

NDPB which is incorporated

Applicable as a result of the legal structure

UK Code1

UK Code – smaller unlisted companies2

UK Stewardship Code3 if exercising

stewardship role

if exercising

stewardship role

if exercising

stewardship role

Disclosure and Transparency Rules4

Companies Act 2006

Articles of Association

Applicable as a result of categorisation as a public body

Managing Public Money

Code of Good Practice

NDPB Code

Public Appointments

Framework Document

Notes

1 UK Corporate Governance Code. Available at: www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf

2 Sections of the UK Code applying to unlisted companies. Available at: www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf

3 UK Stewardship Code. Available at: www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf

4 Maintained by UK Listing Authority. Available at: https://fshandbook.info/FS/html/handbook/DTR

5 Governance resources applicable to statutory companies or companies incorporated by Royal Charter are not included. An incorporated NDPB may take the form of a private company limited by shares or by guarantee.



4.13 The World Bank45 and Organisation for Economic Cooperation and Development (OECD)46 have set out best practice governance principles for government companies. These are also relevant as they are internationally-agreed standards on how governments should exercise ownership of state-owned-enterprises.

4.14 Managing Public Money47 provides a number of suggestions concerning the relationship between a shareholder department and a Public Corporation,48 providing guidance for some but not all companies in government (Figure 15).

45 Corporate Governance of State Owned Enterprises. Available at: https://openknowledge.worldbank.org/bitstream/handle/10986/20390/9781464802225.pdf?sequence=1

46 OECD Guidelines on Corporate Governance of State-Owned Enterprises. Available at: www.oecd.org/daf/ca/corporategovernanceofstate-ownedenterprises/34803211.pdf

47 Managing Public Money paragraph 7.7.2.48 A public corporation is a statistical classification. A public corporation may take the legal form of a company.

Figure 15Outline terms for relationship with a Public Corporation

“Sponsor departments should define any contractual relationship with a corporate in a framework document adapted to suit the corporate context while delivering public sector disciplines. The financial performance expected should give the shareholder department a fair return on the public funds invested in the business.”

Outline terms:

• the shareholder’s strategic vision for the business, including the rationale for public ownership and the public sector remit of the business;

• the capital structure of the business and the agreed dividend regime, with suitable incentives for business performance;

• the business objectives the enterprise is expected to meet, balancing policy, customer, shareholder and any regulatory interests;

• the department’s rights and duties as shareholder, including: governance of the business; procedure for appointments (and disappointments); financial and performance monitoring; any necessary approvals processes; the circumstances of, and rights upon, intervention; and

• details of any other relationships with any other parts of government.

Source: Managing Public Money, Paragraph 7.7.2 and Box 7.5. Available at: www.gov.uk/government/uploads/system/uploads/attachment_data/fi le/454191/Managing_Public_Money_AA_v2_-jan15.pdf


Central Oversight

4.15 There are two bodies which manage the government’s interests in some of its companies: the Shareholder Executive (ShEx) and UK Financial Investments Limited (UKFI)49 but management of the government’s corporate portfolio is conducted mainly at departmental level.

4.16 Managing Public Money promotes the use of ShEx.50 A Committee of Public Accounts report in 2007 51 recommended that “there should be a presumption that government businesses come within the Executive’s portfolio”. The Shareholder Executive’s objective is to be an effective shareholder of businesses owned or part-owned by the government and to manage government’s interventions in the private sector in order to secure best value for the taxpayer. It focuses its resources on the those government businesses where it can have most impact, in general by acting as a shareholder of those arm’s-length bodies that are structured to allow a meaningful shareholder function and other assets facing complex transformations. Our analysis has found that at of the 20 businesses ShEx was responsible for in 2013-14, 14 were companies in government.52 The government announced in May 2015 that ShEx would merge with UKFI into a new company, UK Government Investments Limited.

Public sector assurance arrangements

4.17 HM Treasury is responsible for appointing the auditor of public bodies including companies in government. Figure 16 overleaf compares responsibility for appointing the auditors across a range of different organisations.

4.18 The Comptroller and Auditor General (C&AG) may also carry out value-for-money (VfM) audits of departments, authorities or other bodies where C&AG is the statutory auditor or auditor by agreement, provided that the ability to do so is included in the agreement expressly or by implication.53 Section 7 of the National Audit Act 1983 gives the C&AG a statutory right of examination into the economy, efficiency and effectiveness VfM with which a body he has reasonable cause to believe has in any of its financial years received more than half its income from public funds has used those resources and has to consult with the body and HM Treasury whether this condition has been met. The C&AG has the same right in respect of any authority or body appointed, or whose members are required to be appointed, by or on behalf of the Crown except specific exemptions.54

49 The Shareholder Executive is a unit within the Department for Business, Innovation & Skills established in 2003 to centralise shareholding expertise within government, to bring a specific focus to shareholder issues and to improve government’s performance as the owner of businesses. UK Financial Investments Ltd (UKFI) was established in 2008 to manage the government’s shareholding in Royal Bank of Scotland (RBS) Lloyds Banking Group (Lloyds) and UK Asset Resolution Limited (UKAR) which integrates the activities of Northern Rock (Asset Management) plc and Bradford & Bingley plc. ShEx and UKFI are explored in more detail in our report Financial Institutions in Government.

50 Managing Public Money paragraph 7.7.1.51 HC Committee of Public Accounts, The Shareholder Executive and Public Sector Businesses, Forty-second Report of

Session 2006-07, HC 409, June 2007.52 Shareholder Executive Annual Review 2013-14, p25. Annual Review 2013-14.53 Section 6 of the National Audit Act 1983.54 These specific exemptions are set out in Schedule 4 of the National Audit Act 1983.


Figure 16Approach to assurance

Form of organisation Party responsible for the appointment of auditors

Departments and other public bodies HM Treasury1

Companies in the private sector The company itself2

Companies in government HM Treasury may appoint the auditor of companies with a public purpose in accordance with note 5 (below). Otherwise the company itself

Academy trusts (companies limited by guarantee) The company itself3

Local services Public Sector Audit Appointments Limited (PSAA) appoints local auditors, under the National Audit Office framework4

Notes

1 Government Resources and Accounts Act, 2010: HM Treasury (HMT) appoints the statutory auditor when it appears to HMT that an organisation is substantially funded by public money.

2 Companies Act 2006. A Companies Act company must have its accounts audited (CA 2006 Part 16 section 475).

3 The Academy Trusts each have an AO who reports to the Department for Education’s Principal AO (PAO) through the Education Funding Agency (EFA). The PAO produces the annual Accountability Statement. EFA translates requirements set out by the Charity Commission in its Statement of Recommended Practice (SORP) into a form applicable to academy trusts. The Accounts Direction outlines the requirements for each academy trust to have these accounts audited annually by independent registered auditors, produce a statement of regularity, propriety and compliance and obtain a regularity assurance report on this statement from the auditor. See www.gov.uk/guidance/academies-accounts-direction

4 The Local Audit and Accountability Act 2014: National Audit Offi ce set the framework for VfM. PSAA Limited is responsible for the appointment of auditors for local government, NHS bodies, and police, fi re, and rescue services.

5 The C&AG is the auditor of accounts of bodies which HM Treasury decides exercise functions of a public nature or are entirely or substantially funded from public funds (Government Resources and Accounts Act 2000, section 11). HM Treasury may by statutory order make C&AG auditor of a body which exercises functions of a public nature or is entirely or substantially funded from public money and have access to documents and if the body is a Companies Act company the order does not need to be laid before Parliament. (Government Resources and Accounts Act 2000 section 25). Failing an order from HM Treasury, the company itself must appoint an auditor. The C&AG is eligible to be appointed as a statutory auditor for a Companies Act company (Companies Act 2006 Part 42 Chapter 3 section 1226).

Sources: Set out in notes above

Companies in government Part Five 37

Part Five

Departmental mapping

5.1 This section shows the companies that we have mapped to each of the 17 central departments.

1 Executive Agency 1 Non-ministerial department

Notes

1 Unless otherwise noted all companies are active.

2 In the 2013-14 fi nancial year.


HM Revenue & Customs

RN Ltd (100%)

The Companies in government identified

Excluded from the CO, ONS or WGA classifications

38 Part Five Companies in government

60 Advisory non-departmental public bodies

132 Other non-departmental public bodies

Ministry of Justice

21 Community Rehabilitation Centres (100%)

4 Executive Agencies42 Executive non-departmental public bodies

Notes







4 Executive non-departmental public bodies

4 Tribunal non-departmental public bodies

Home Office

The Police ICT Company Ltd(by guarantee) (dormant)

College of Policing Ltd (by guarantee)

Forensic Archive Ltd (by guarantee)


1 Executive Agency

Notes






Consolidated in WGA and may also be listed in the ONS


1 Executive non-departmental public body

1 Advisory non-departmental public body

Notes






First line subsidiaries

Holds UK interests in a number of multinational institutions such as the African and Asian Development Banks, Africa Risk Capacity Ltd, UN and World Bank institutions

CDC Group plc (100%)

CDC Holdings Guernsey Ltd

DFCU LtdCDC South Asia LtdCDC India Advisers Private Ltd

Department for International Development


2 Executive non-departmental public bodies

Department for Education


Notes


2 Dissolved in the year 2013-14.





Only listed in the ONS

Building Schools for the Future Investments (BSFI) Ltd² (100%)

Partnerships for Schools Ltd (100%)QCDA Enterprises Ltd²

(by guarantee)

3 Executive Agencies

The departmental group also includes 2,591 Academy Trusts, legally defined as arm’s-length bodies


Notes




Foreign & Commonwealth Office

British Intergovernment Services Authority Ltd

(100%) (dormant)

The Westminster Foundation for Democracy Ltd (by guarantee)

(Executive NDPB)

1 Dormant subsidiary UK China Forum Ltd






The Great Britain – China Centre (by guarantee)

(Executive NDPB)

2 Additional Executive non-departmental public bodies


2 Tr

ibun

al n

on-

dep

artm

enta

l p

ublic

bo

die

s

2 A

dvi

sory

no

n-d

epar

tmen

tal

pub

lic b

od

ies

No

tes

1 U

nles

s ot

herw

ise

note

d al

l com

pani

es a

re a

ctiv

e.

2 N

ow D

isab

led

Peo

ple

’s E

mp

loym

ent C

orp

orat

ion

(GB

) Ltd

.

3 In

the

2013

-14

fi nan

cial

yea

r.

Sou

rce:

Nat

iona

l Aud

it O

ffi ce

ana

lysi

s

Th

e C

ompa

nies

in g

over

nmen

t ide

ntifi

ed

E

xclu

ded

from

the

CO

, ON

S o

r W

GA

cla

ssifi

catio

ns

C

onso

lidat

ed in

WG

A a

nd m

ay a

lso

be li

sted

in th

e O

NS

Fi

rst l

ine

subs

idia

ries

3 A

dd

ition

al E

xecu

tive

non-

dep

artm

enta

l p

ublic

bod

ies

Wor

king

Li

nks

Fran

ce

Wor

king

Li

nks

Pol

and

NES

T P

ensi

on

Sch

eme

Wor

king

Lin

ks

Em

ploy

men

t Ltd

(25%

)

Rem

ploy

Ltd

2 (b

y gu

aran

tee)

(E

xecu

tive

ND

PB

)

The

Pen

sion

s A

dvi

sory

Ser

vice

Lt

d (b

y gu

aran

tee)

(E

xecu

tive

ND

PB

)

Nat

iona

l E

mpl

oym

ent

Sav

ings

Tru

st

Cor

pora

tion

(by

Con

trol

) (E

xecu

tive

ND

PB

)

Dep

artm

ent

for

Wo

rk &

Pen

sio

ns


2 E

xecu

tive

non-

dep

artm

enta

l p

ublic

bo

die

s

MyC

SP

Ltd

(35%

)

Sha

red

Ser

vice

s C

onne

cted

Ltd

(2

5%)

7 A

dvi

sory

no

n-d

epar

tmen

tal

pub

lic b

od

ies

No

tes

1 U

nles

s ot

herw

ise

note

d al

l com

pani

es a

re a

ctiv

e.

2 In

the

2013

-14

fi nan

cial

yea

r.

Sou

rce:

Nat

iona

l Aud

it O

ffi ce

ana

lysi

s

Th

e C

ompa

nies

in g

over

nmen

t ide

ntifi

ed

E

xclu

ded

from

the

CO

, ON

S o

r W

GA

cla

ssifi

catio

ns

Fi

rst l

ine

subs

idia

ries

1 E

xecu

tive

Age

ncy

The

Big

Soc

iety

Tr

ust (

by C

ontr

ol)

AX

ELO

S L

td(4

9%)

Big

Soc

iety

C

apita

l Ltd

MyC

SP

Tru

stee

C

ompa

ny L

td

Beh

avio

ural

In

sigh

ts T

rust

ee

Com

pany

Ltd

Beh

avio

ural

In

sigh

ts L

td(3

5%)

Cab

inet

Off

ice


2 E

xecu

tive

Ag

enci

es

8 A

dvi

sory

no

n-d

epar

tmen

tal

pub

lic b

od

ies

No

tes

1 U

nles

s ot

herw

ise

note

d al

l com

pani

es a

re a

ctiv

e.

2 In

the

2013

-14

fi nan

cial

yea

r.

Sou

rce:

Nat

iona

l Aud

it O

ffi ce

ana

lysi

s

Th

e C

ompa

nies

in g

over

nmen

t ide

ntifi

ed

E

xclu

ded

from

the

CO

, ON

S o

r W

GA

cla

ssifi

catio

ns

C

onso

lidat

ed in

WG

A a

nd m

ay a

lso

be li

sted

in th

e O

NS

O

nly

liste

d in

the

ON

S

Fi

rst l

ine

subs

idia

ries

7 E

xecu

tive

non-

dep

artm

enta

l p

ublic

bod

ies

Dep

artm

ent

of

Hea

lth

NH

S

prof

essi

onal

s Lt

d (1

00%

)

NH

S

Pro

pert

y S

ervi

ces

Ltd

(100

%)

Dr

Fost

er

Inte

llige

nce

Ltd

(49%

)

NH

S S

hare

d B

usin

ess

Ser

vice

s (5

0%)

NA

GA

UK

TO

PC

O L

td

(20%

)

Com

mun

ity

Hea

lth

part

ners

hips

Lt

d (1

00%

)

Gen

omic

s E

ngla

nd L

td

(100

%)

Ski

pton

Fu

nd L

td

(by

guar

ante

e)

1 D

orm

ant

subs

idia

ryN

AG

A U

K

BID

CO

Ltd

Dr

Fost

er In

cD

r Fo

ster

Ltd

Dr

Fost

er

Res

earc

h Lt

d

DC

I B

iolo

gica

ls

Inc


1 Executive Agency

Notes


2 Now IUK Holdings Ltd.



Numerous subsidiaries

Royal Mint Museum Services Ltd






Financial Services

Compensation Scheme Ltd

(by guarantee)

Bank of England (Royal

Charter)

The Royal Mint

Museum Ltd (by guarantee)

The Royal Mint Ltd (100%)

Financial Ombudsman Service Ltd

(by guarantee)

The Money Advice Service

(by guarantee)

Infrastructure Finance Unit Ltd (100%)

Financial Conduct

Authority Ltd (by guarantee)

Help to Buy (HMT) Ltd

(100%)

UK Financial Investments Ltd (100%)

UK Asset Resolution Ltd (100%)

Royal Bank of Scotland Group plc

(80%)

Lloyds Banking

Group plc (25%)


RM Money Ltd




Partnerships UK plc (45%)

(dormant)

LKPM Ltd2 (100%)

(dormant)

IUKInvestments Ltd


HM Treasury


1 Executive Agency

Notes


2 Now IUK Holdings Ltd.




Royal Mint Museum Services Ltd






Financial Services

Compensation Scheme Ltd

(by guarantee)

Bank of England (Royal

Charter)

The Royal Mint

Museum Ltd (by guarantee)

The Royal Mint Ltd (100%)

Financial Ombudsman Service Ltd

(by guarantee)


(by guarantee)

Infrastructure Finance Unit Ltd (100%)

Financial Conduct

Authority Ltd (by guarantee)

Help to Buy (HMT) Ltd

(100%)

UK Financial Investments Ltd (100%)

UK Asset Resolution Ltd (100%)

Royal Bank of Scotland Group plc

(80%)

Lloyds Banking

Group plc (25%)


RM Money Ltd




Partnerships UK plc (45%)

(dormant)

LKPM Ltd2 (100%)

(dormant)

IUKInvestments Ltd


HM Treasury


Notes

1 Recognised as a ‘Subsidiary undertaking’ with the HCA Annual Report and Financial Statements 2013-14.

2 Recognised as an ‘Associated undertaking and joint venture’ with the HCA Annual Report and Financial Statements 2013-14.

3 THFC is a private limited company incorporated in the UK under the Industrial and Provident Societies Acts 1965 to 2002. Per THFC Annual Report andFinancial Statements, HCA owns £1 of £7 share capital in THFC, and appoints a non-executive director to the board of THFC. THFC is not disclosed aseither a subsidiary undertaking nor an associated undertaking within the HCA Annual Report and Financial Statements 2013-14.








Incorporated public body


King Waterfront (Estates) Ltd

(by guarantee)2

Bristol and Bath Science Park Estate

Management Company Ltd

(50%)2

Countryside Maritime Ltd

(50%)2

emEP Ltd (100%)(dormant)1

Temple Quay Management Ltd (24% and

Special share)2

Pride in Camp Hill Ltd

(by guarantee)2

AWM (subsidiary) Ltd (100%)(dormant)1

The Housing Finance

Corporation Ltd3

The Estuary Management Company Ltd

(by guarantee)1

English Partnerships

(LP) Ltd (100%)1

Norwepp (NWDA

subsidiary) Ltd (100%)1

ONE NorthEast General Partner

Ltd (100%)(dormant)1

Homes and Communities Agency (Executive NDPB)

Independent Housing Ombudsman Ltd (by guarantee) (Executive NDPB) (Dormant)

Nottingham Enterprise Zone Development Company Ltd (50%)

THFC (Services) Ltd and 4 Industrial and Provident Companies

Advantage (GP) Ltd

Blueprint (GP) Ltd

NorwePP (General Partner) Ltd

The Leasehold Advisory Service (by guarantee) (Executive NDPB)

Lease Conferences Ltd

1 Tribunal non-departmental public body






Notes

1 Recognised as a ‘Subsidiary undertaking’ with the HCA Annual Report and Financial Statements 2013-14.

2 Recognised as an ‘Associated undertaking and joint venture’ with the HCA Annual Report and Financial Statements 2013-14.

3 THFC is a private limited company incorporated in the UK under the Industrial and Provident Societies Acts 1965 to 2002. Per THFC Annual Report andFinancial Statements, HCA owns £1 of £7 share capital in THFC, and appoints a non-executive director to the board of THFC. THFC is not disclosed aseither a subsidiary undertaking nor an associated undertaking within the HCA Annual Report and Financial Statements 2013-14.










King Waterfront (Estates) Ltd

(by guarantee)2

Bristol and Bath Science Park Estate

Management Company Ltd

(50%)2

Countryside Maritime Ltd

(50%)2

emEP Ltd (100%)(dormant)1

Temple Quay Management Ltd (24% and

Special share)2

Pride in Camp Hill Ltd

(by guarantee)2

AWM (subsidiary) Ltd (100%)(dormant)1

The Housing Finance

Corporation Ltd3

The Estuary Management Company Ltd

(by guarantee)1

English Partnerships

(LP) Ltd (100%)1

Norwepp (NWDA

subsidiary) Ltd (100%)1

ONE NorthEast General Partner

Ltd (100%)(dormant)1

Homes and Communities Agency (Executive NDPB)

Independent Housing Ombudsman Ltd (by guarantee) (Executive NDPB) (Dormant)

Nottingham Enterprise Zone Development Company Ltd (50%)

THFC (Services) Ltd and 4 Industrial and Provident Companies

Advantage (GP) Ltd

Blueprint (GP) Ltd

NorwePP (General Partner) Ltd

The Leasehold Advisory Service (by guarantee) (Executive NDPB)

Lease Conferences Ltd







Notes










Assured Food Standards

(by guarantee)

MLC Pension Scheme

Trustees Ltd (by guarantee)

(dormant)

Potato Council Ltd

(by guarantee) (dormant)

Crop Evaluation Ltd (100%)(dormant)

Meat & Livestock

Commercial Services Ltd

(by guarantee)

Sutton Bridge

Experimental Unit Ltd (100%)

HGCA Ltd (by guarantee)

(dormant)

Horticultural Development Company Ltd (by guarantee)

(dormant)

EBLEX Ltd (by guarantee)

(dormant)

BPEX Ltd (by guarantee)

(dormant)

The National Forest Company (by guarantee) (Executive NDPB)

Centre for the Environment, Fisheries and Aquaculture Science (Executive Agency)

5 dormant subsidiaries

Board of Trustees of the Royal Botanic Gardens (Executive NDPB)





4 Additional Executive Agencies

DiaryCo Ltd (by guarantee)

(dormant)

Agriculture and Horticulture Development Board (Executive NDPB)

HGCA Pension Scheme


(dormant)

RBG Kew Enterprises Ltd (100%)

Joint Nature Conservation Committee (Executive NDPB)

Cefas Technology Ltd (100%)

JNCC Support Co

(by guarantee)


Notes










Assured Food Standards

(by guarantee)

MLC Pension Scheme


(dormant)

Potato Council Ltd

(by guarantee) (dormant)

Crop Evaluation Ltd (100%)(dormant)

Meat & Livestock

Commercial Services Ltd

(by guarantee)

Sutton Bridge

Experimental Unit Ltd (100%)

HGCA Ltd (by guarantee)

(dormant)

Horticultural Development Company Ltd (by guarantee)

(dormant)

EBLEX Ltd (by guarantee)

(dormant)

BPEX Ltd (by guarantee)

(dormant)

The National Forest Company (by guarantee) (Executive NDPB)

Centre for the Environment, Fisheries and Aquaculture Science (Executive Agency)

5 dormant subsidiaries

Board of Trustees of the Royal Botanic Gardens (Executive NDPB)





4 Additional Executive Agencies

DiaryCo Ltd (by guarantee)

(dormant)

Agriculture and Horticulture Development Board (Executive NDPB)

HGCA Pension Scheme


(dormant)

RBG Kew Enterprises Ltd (100%)

Joint Nature Conservation Committee (Executive NDPB)

Cefas Technology Ltd (100%)

JNCC Support Co

(by guarantee)


Notes










QinetiQ Group plc (Special share)

The Royal Hospital Chelsea

Royal Hospital School

Enterprises Ltd (100%)

Devonport Royal

Dockyard Ltd (Special

share)

AWE Management

Ltd (Special share)

Royal Air Force Museum

(Executive NDPB)

The Chamber of Shipping Ltd

(3%)

Rosyth Royal Dockyard Ltd (Special share)


1 Other non-departmental public body

BAE Systems Marine

(Holdings) Ltd (Special share)

International Military

Services Ltd (100%)

Royal Hospital Chelsea

Appeal Ltd (by guarantee)

1 Dormant subsidiary

AWE plcBAE Systems Marine Ltd

BAE Systems Projects (Canada) Ltd

VSEL Birkenhead Ltd

VSEL Consortium Trustees Ltd

Diamond Detectors Ltd

Warship Design Services Ltd

QinetiQ Holdings Ltd

QinetiQ Ltd

1 Dormant subsidiary and:

Chelsea Pensioner (RH) Ltd

Tricorne Traders Ltd

Defence Science &

Technology Laboratory

(Trading Fund Agency)

National Army Museum

(Executive NDPB)


Trading Ltd (100%)

Royal Air Force Museum Enterprises Ltd

(by control)

Tetricus Ltd (33%)

UK Hydrographic

Office (Trading Fund

Agency)

Admiralty Holdings Ltd

(100%)

9 Dormant subsidiaries and:

Admiralty Hydrographic Asia Pacific Pte Ltd

1 Dissolved subsidiary and:

National Museum of the Royal Navy Trading

Fleet Air Arm Museum CLG Ltd

Royal Marines Museum

Portsmouth Historic Dockyard

Royal Navy Submarine Museum

RNSM Enterprise Ltd

HMS Trincomalee Trust

RN Museum Ltd

Fleet Air Arm Museum Trading Ltd

NMRN Services

The HMS Caroline Preservation Company

Ploughshare Innovations Ltd (100%)

Gordon House

(London) Ltd (100%)

Esroe Ltd

Claresys Ltd

ProKma Technologies Ltd

Remo Technologies Ltd

P2i Ltd

Enigma Diagnostics Ltd

Subsea Asset Technologies Location Ltd

The National Museum of

the Royal Navy (by guarantee)

(Executive NDPB)


Investments Ltd (by Control)

Ministry of Defence 1 Additional Executive Agency


Notes










QinetiQ Group plc (Special share)

The Royal Hospital Chelsea

Royal Hospital School


Devonport Royal

Dockyard Ltd (Special

share)

AWE Management

Ltd (Special share)


(Executive NDPB)

The Chamber of Shipping Ltd

(3%)

Rosyth Royal Dockyard Ltd (Special share)


1 Other non-departmental public body

BAE Systems Marine

(Holdings) Ltd (Special share)

International Military

Services Ltd (100%)

Royal Hospital Chelsea

Appeal Ltd (by guarantee)


AWE plcBAE Systems Marine Ltd

BAE Systems Projects (Canada) Ltd

VSEL Birkenhead Ltd

VSEL Consortium Trustees Ltd

Diamond Detectors Ltd

Warship Design Services Ltd

QinetiQ Holdings Ltd

QinetiQ Ltd

1 Dormant subsidiary and:

Chelsea Pensioner (RH) Ltd

Tricorne Traders Ltd

Defence Science &

Technology Laboratory

(Trading Fund Agency)


(Executive NDPB)


Trading Ltd (100%)

Royal Air Force Museum Enterprises Ltd

(by control)

Tetricus Ltd (33%)

UK Hydrographic

Office (Trading Fund

Agency)

Admiralty Holdings Ltd

(100%)


Admiralty Hydrographic Asia Pacific Pte Ltd

1 Dissolved subsidiary and:

National Museum of the Royal Navy Trading

Fleet Air Arm Museum CLG Ltd

Royal Marines Museum

Portsmouth Historic Dockyard

Royal Navy Submarine Museum

RNSM Enterprise Ltd

HMS Trincomalee Trust

RN Museum Ltd

Fleet Air Arm Museum Trading Ltd

NMRN Services

The HMS Caroline Preservation Company

Ploughshare Innovations Ltd (100%)

Gordon House

(London) Ltd (100%)

Esroe Ltd

Claresys Ltd

ProKma Technologies Ltd

Remo Technologies Ltd

P2i Ltd

Enigma Diagnostics Ltd

Subsea Asset Technologies Location Ltd

The National Museum of

the Royal Navy (by guarantee)

(Executive NDPB)


Investments Ltd (by Control)

Ministry of Defence 1 Additional Executive Agency


Notes










Department of Energy & Climate Change


Nuclear Liabilities Fund Ltd (100%)

NNL Holdings Ltd (100%)

British Energy Bond Finance plc

(Special share)

The Low Carbon Contracts

Company Ltd (100%) (dormant)

Radioactive Waste Management Ltd (100%) (dormant)

Direct Rail Services Ltd (100%)

NDA Properties Ltd (100%)

INS Rokkasho KK (Japan) Ltd (66%)

North Highland Regeneration Fund

(by guarantee)

Rutherford Indemnity Ltd

(100%)

Energus(by guarantee)

National Nuclear Laboratory Ltd

1 dormant and 4 dissolved in the year

The Global Climate

Partnership Fund (19%)

Electricity Settlements


Nuclear Decommissioning

Authority (Executive NDPB)

International Nuclear Services Ltd (100%)

Britains Energy Coast (by guarantee)

INS Japan KK

INS France SAS

Pacific Nuclear Transport Ltd


Notes












Nuclear Liabilities Fund Ltd (100%)

NNL Holdings Ltd (100%)

British Energy Bond Finance plc

(Special share)

The Low Carbon Contracts


Radioactive Waste Management Ltd (100%) (dormant)

Direct Rail Services Ltd (100%)

NDA Properties Ltd (100%)

INS Rokkasho KK (Japan) Ltd (66%)

North Highland Regeneration Fund

(by guarantee)

Rutherford Indemnity Ltd

(100%)

Energus(by guarantee)

National Nuclear Laboratory Ltd

1 dormant and 4 dissolved in the year

The Global Climate

Partnership Fund (19%)

Electricity Settlements


Nuclear Decommissioning

Authority (Executive NDPB)

International Nuclear Services Ltd (100%)

Britains Energy Coast (by guarantee)

INS Japan KK

INS France SAS

Pacific Nuclear Transport Ltd




Queensway Rail Ltd1 (100%)

NATS Holdings

Ltd2 (45.5%)

High Speed (HS5) Ltd (by

guarantee) (dormant)

Vincent Rail Ltd1 (100%)

London and

Continental Railways

Ltd2 (100%) (Public Corp)



Marsham Rail Ltd1 (100%)

LCR Finance

plc (100%)



College Rail Ltd1 (100%)

Inter-Capital and

Regional Rail Ltd (Special share)

High Speed Rail Ltd (100%)(dormant)

The Pullman

Car Company

Ltd1 (100%)

Network Rail Ltd (by guarantee)

HS2 Ltd (100%)

(dormant)

RFD (Channel Tunnel)

Ltd1 (100%)

CTRL Section 1 Finance

plc (100%)

Bower Rail Ltd1 (100%)

British Transport Hotels Ltd1

(100%)

Greycoat Rail Ltd1 (100%)

ITSO Services Ltd (by

guarantee)

High Speed Two (HS2)

Ltd (by guarantee) (Executive

NDPB)

Millbank Rail Ltd1 (100%)

ITSO Ltd (by

guarantee)

Parkside Rail Ltd1 (100%)

BRB (Residuary) Ltd2 (100%)

Trinity House Corporation (Executive

NDPB) (Royal

Charter)



Civil Aviation Authority (Public Corp)

British Rail Engineering Ltd

British Rail Ltd

British Railways Ltd

British Railways Board Ltd

NATS (USA) Inc

NATS SverigeAB

NATS (En Route) plc

NATS Employee Sharetrust Ltd

NATS (Services) Ltd

NATSNav Ltd

FerroNATS Air Traffic Services SA

ESSP SAS


Eurostar International Ltd

KXC (LCR) LP Investment Ltd

Metropolitan King’s Cross Ltd

Whittles Properties Brunel Ltd

Whittles Properties Trent & Derwent Ltd

Whittles Properties Croydon Ltd

Whittles Properties Manchester Ltd

NR Holdco Ltd

NR Insurance Ltd

NR (High Speed) Ltd

NR Development Ltd

NR Pension Trustee Ltd

NR Consulting Ltd

NR Certification Body Ltd

NR (VY1) Ltd

NR (VY2) Ltd

Notes

1 Active (Dormant).

2 Dissolved in the year 2013-14.





Air Safety Support

International Ltd (100%)

CAA International Ltd (100%)

Department for Transport

7 Dormant subsidiaries and East Coast Main Line Company Ltd

Directly Operated

Railways Ltd (100%)

(Executive NDPB)













British Business Bank plc (100%)

Greencoat UK Wind plc (15%)

UK Green Investment Bank plc (100%)

British Nuclear Fuels Ltd (100%)

The Start-up Loans

Company (by

guarantee)

Postal Services Holding

Company Ltd

(Special share & 100%)

Rolls-Royce Holdings

plc (Special share)

Enrichment Holding Ltd

(100%)

BAE Systems

plc (Special share)

BIS (Postal Services Act 2011) Company Ltd (100%)

Wave Hub Ltd (100%)

UK Shared Business Services (100%)

Student Loans Company Ltd

(85%) (Executive NDPB)

Financial Reporting Council Ltd (by Control)

Higher Education Statistics Agency Ltd (by Control)

UK GIB Rhyl Flats Investment

UK GIB Financial Services

UK GIB 1

UK GIB 2

UK GIB 3

Aviva Investors REaLM Energy Centres

Energy Saving Investments

UK Waste Resources & Energy Investment

UK Green Sustainable Waste & Energy Investment

UK Energy Efficiency Investments

Notes




Science & Technology

Facilities Council (Executive NDPB)

(Royal Charter)

Medical Research Council (Executive NDPB)

(Royal Charter)

Biotechnolology & Biological Sciences

Research Council (Executive NDPB)

(Royal Charter)

UK Atomic Energy Authority (Executive NDPB)

Innovate UK (Executive-NDPB)

(Royal Charter)

The Natural Environment


(Royal Charter)

The Engineering and Physical

Sciences Research Council (Executive NDPB)

(Royal Charter)

The Arts and Humanities


(Royal Charter)

Capital for Enterprise Ltd

(Executive NDPB)

AEA Insurance Ltd (100%)

HESA Services Ltd

Tappaghan

Bin Mountain

Carcant

Cotton Farm

Earl’s Hall Farm

1 Dormant and:

British Nuclear Group Ltd

Royal Mail plc

Post Office Ltd

Enrichment Investments Ltd

BIS (Postal Services Act 2011) B Company Ltd


Accountancy & Actuarial Discipline Board Ltd (100%)

Rolls-Royce Group plc


Diamond Light Source Ltd

STFC Innovations Ltd

The Francis Crick Institute Ltd

Medical Research Council Technologies Ltd

UK Biobank Ltd

1 Dormant and:

International Geosciences (IGS) Ltd

Wallingford Hydrosolutions Ltd

Microbial Solutions Ltd

Spectrum Ltd

Capital for Enterprise (GP) Ltd

Capital for Enterprise Fund Managers Ltd

4 Tribunal non-departmental public bodies

The Economic and Social


(Royal Charter)











Department for Culture, Media & Sport

Tour de France Hub 2014 Ltd

The English Institute of Sport Ltd

Horniman Museum Enterprises Ltd

ArtCo Trading Ltd

S4C2 Cyf

S4C Rhyngwladol Cyf

European Co-Production Fund Ltd

British Screen Rights Ltd

British Filmmakers Ltd

Stratford Village Development (GP) Ltd

Stratford Village Development LP1 Ltd

Stratford Village Development LP2 Ltd

5 Dormant Companies

British Museum Ventures Ltd

V & A Ltd

Sir John Soan’s

Museum (Executive

NDPB)

Science Museum Group

(Executive NDPB)

The Geffrye Museum Trust (by

Guarantee) (Executive

NDPB)

Olympic Delivery Authority

(Executive NDPB)

S4C (Public Corp)

OfcomChurches

Conservation Trust

British Broadcasting Corporation

(Royal Charter)(Public Corp)

National Film Development

Fund (by guarantee)

Royal Armouries (Executive

NDPB)

The Natural History

Museum (Executive

NDPB)

England Heritage

(Executive NDPB

The English Sports Council (Royal Charter)

(Executive NDPB)

United Kingdom

Anti-Doping Ltd (by

guarantee)(Executive

NDPB)

The Wallace Collection (Executive

NDPB)

National Museums Liverpool (Executive

NDPB)

The British Museum

(Executive NDPB)

Victoria & Albert Museum

(Executive NDPB)

Visit Britain (Executive

NDPB)

Tate (Executive

NDPB)

The Public Horniman Museum & Public

Park Trust (by guarantee)

(Executive NDPB)

Arts Council England

(Executive NDPB) (Royal

Charter)

The United Kingdom Sports Council

(Executive NDPB) (Royal

Charter)

Soane Museum

Enterprises Ltd

(100%)

English Heritage Ltd (by


English Heritage Trading

Ltd (100%)

Hertford Housing

Marketing Ltd

(100%)

Visit Britain India

Private Ltd

(100%)

NML Trading

Ltd (100%)

V & A Enterprises

Ltd (100%)

British Museum

Great Court Ltd

(1005)

Tate Enterprises

Ltd (100%)

Tate Gallery Projects

Ltd (100%)

Tate Gallery

Publishing Ltd

(100%) (dormant)

S4C Masnachol

Cyf (100%)

The Office of the

Adjudicator Ltd (100%)

Churches Conservation

Trust Enterprises Ltd (100%)

British Film

Institute Ltd

(100%)

Connoisseur Video Ltd

(100%)(dormant)

Project Rosebud

Ltd (100%)

(dormant)

British Screen Finance

Ltd (100%)

Royal Armouries Trading &


The Natural History

Museum Trading

Company Ltd

(100%)

SVDP Ltd (1005)

(dormant)

SCMG Enterprises

Ltd(100%)

The British

Museum Company

Ltd (100%)

V & A Holdings

Ltd (1005)







BBC Comercial Holdings Ltd

BBC Property Development Ltd

Media Application Techologies Ltd

BBC Subscription Television Ltd

BBC World Service Holdings Ltd

DSHS Ltd

Broadcasters’ Audience Research Board Ltd

BBC Investments Ltd

BBC property Investment Ltd

BBC Property Ltd

Centre House Productions Ltd

BBC Digital Programme Services Ltd

BBC Free to View Ltd

BBC Free to View (Satellite) Ltd

BBC News Ltd

Notes




English Sports Development Trust Ltd

The Sports Council Trust Company

National Portrait Gallery

Company Ltd (100%)

National Portrait Gallery

Executive NDPB)

Royal Museums Greenwich (Executive

NDPB)

National Maritime Museum

Enterprises Ltd

(100%)

Imperial War

Museum Trading

Company Ltd

(100%)

Imperial War

Museum (Executive

NDPB)

British Film Institute

(Executive NDPB)


1 Executive Agency


62 Appendix One Companies in government

Appendix One

Summary of mapping by department

Companies in government Appendix One 63

Figure 17Companies and other public bodies by department

Department Companies¹ of whichare dormant

Companies subsidiaries²

Total Other categorised public bodies³

Total

Cabinet Office 5 0 3 8 10 18


25 0 37 62 28 90


15 4 9 24 7 31


35 5 36 71 31 102

Department for Education4 3 0 0 2,594 7 2,601(2,591)


15 2 10 25 7 32


16 9 5 21 22 43

Department for International Development

1 0 4 5 2 7

Department for Transport 31 17 43 74 11 85

Department for Work & Pensions

4 0 3 7 7 14

Department of Health5 8 0 6 14 17 31


3 1 2 5 4 9

HM Revenue & Customs 1 0 0 1 2 3

HM Treasury 15 2 29 44 3 47

Home Office 3 1 0 3 17 20

Ministry of Defence 17 0 42 59 28 87

Ministry of Justice 21 0 0 21 238 259

Total 2,809 41 229 3,038 441 3,479

Notes

1 Companies owned or controlled by government; includes companies where government holds a special share.

2 Only fi rst line subsidiaries.

3 Includes Executive NDPBs, Tribunal NDPBs, Advisory NDPBs, Other NDPBs, Executive Agencies and non-ministerial departments.

4 Department for Education includes 2,591 Academy trusts.

5 Department of Health excludes NHS entities.

Source: National Audit Offi ce analysis of companies in government

64 Appendix One Companies in government

Details of companies created between 2010 and 2014

Figure 18Companies created between 2010 and 2014

Department Companies created

Cabinet Office Axelos Ltd

Behavioural Insights Ltd

MyCSP Ltd

Shared Services Connected Ltd

The Big Society Trust


BIS (Postal Services Act 2011) Company Ltd

British Business Bank plc

Greencoat UK Wind plc

Rolls-Royce Holdings plc (Special share)

The Start-Up Loans Company

UK Green Investment Bank plc

Wave Hub Ltd


Bristol and Bath Science Park Estate Management Company Ltd

Nottingham Enterprise Zone Development Company Ltd


Churches Conservation Trust Enterprises Limited

Royal Armouries Trading & Enterprises Ltd

Soane Museum Enterprises Limited

SVDP Ltd


Electricity Settlements Company Limited

Radioactive Waste Management Ltd

The Low Carbon Contracts Company Limited


HGCA Pension Plan Trustees Ltd

MLC Pension Scheme Trustees Ltd

Department for Transport Bower Rail Limited

College Rail Limited

Greycoat Rail Limited

Marsham Rail Limited

Millbank Rail Limited

Parkside Rail Limited

Queensway Rail Limited

Vincent Rail Limited

HS2 Ltd

Department for Work & Pensions

National Employment Savings Trust (NEST) Corporation1

Department of Health Genomics England Limited

NHS Property Services Limited

NAGA UK TOPCO Ltd

Companies in government Appendix One 65

Figure 18 continuedCompanies created between 2010 and 2014Department Companies created


British Intergovernment Services Authority Ltd

HM Treasury Help to Buy (HMT) Ltd


UK Asset Resolution Ltd (Bradford & Bingley plc and NRAM plc)

LKPM Ltd (now IUK Holdings Ltd)

Home Office College of Policing Ltd

The Police ICT Company Ltd

Forensic Archive Ltd

Ministry of Defence Gordon House (London) Ltd

Ministry of Justice Bedfordshire, Cambridgeshire, Hertfordshire and Northamptonshire Community Rehabilitation company limited

Bristol, Gloucestershire, Somerset & Wiltshire Community Rehabilitation company limited

Cheshire & Greater Manchester Community Rehabilitation company limited

Cumbria and Lancashire Community Rehabilitation company limited

Derbyshire, Nottinghamshire, Leicestershire & Rutland Community Rehabilitation company limited

Dorset, Devon & Cornwall Community Rehabilitation company limited

Durham Tees Valley Community Rehabilitation company limited

Essex Community Rehabilitation company limited

Hampshire & Isle of Wight Community Rehabilitation company limited

Humberside, Lincolnshire & North Yorkshire Community Rehabilitation company limited

Kent, Surrey & Sussex Community Rehabilitation company limited

London Community Rehabilitation company limited

Merseyside Community Rehabilitation company limited

Norfolk & Suffolk Community Rehabilitation company limited

Northumbria Community Rehabilitation company limited

South Yorkshire Community Rehabilitation company limited

Staffordshire & West Midlands Community Rehabilitation company limited

Thames Valley Community Rehabilitation company limited

Wales Community Rehabilitation company limited

Warwickshire and West Mercia Community Rehabilitation company limited

West Yorkshire Community Rehabilitation company limited

Note

1 NEST is a statutory corporation but its funding is dependent on DWP, and from the NEST annual report meets two of the ONS tests of control, namely: provision of funding accompanied by rights of control over how that funding is spent; and right to demand certain reports or information. DWP has no control or any responsibility over the scheme assets or performance of/return on the assets under management.

Source: National Audit Offi ce analysis of companies in government

66 Appendix Two Companies in government

Appendix Two

Description of company types

Companies in government Appendix Two 67

Figure 19Description of company types

Type Characteristics Formation

Private limited by guarantee

Has members not shareholders, separate legal entity from members, liability limited to nominal amount, usually operated on a not for profit, can raise capital through borrowing.

Incorporated under the Companies Act 2006 and registered at Companies House.

Private limited by shares

Owned by shareholders, separate legal entity, liability limited to amount unpaid on shares, operated on a for profit basis, cannot raise funds by offering shares to the public.


Public limited by shares

Has features of private limited by shares but name ends with words ‘public limited company’ or ‘PLC’ and can raise funds by offering shares to the public.


Unlimited Has all the features of a private company limited by shares; liability of members is unlimited.

Community Interest Company

A limited company, created for conducting a business or other activity for community benefit. Assets and profits must be permanently retained within the CIC and used solely for community benefit, or transferred to another organisation which itself has an asset lock, such as a charity, or another CIC.

Companies (Audit, Investigations and Community Enterprise) Act 2005. Formation and registration is similar to any limited company. Registered at Companies House – Registrar of Community Interest Companies.

Royal Charter Created by Royal Charter which sets out the terms of operation.

Recommendation of the Privy Council.

Statutory Entities incorporated pursuant to legislation other than Companies Act 2006.

Bespoke legislation.

Trading Fund Executive Agency. Not a separate legal entity and remains part of the department. Engages in commercial operations and finances itself from sales of goods or services. HM Treasury appoints the Accounting Officer.

Statutory Order under Government Trading Funds Act 1973 with Treasury concurrence.

Registered Societies Societies registered under the Co-operative and Community Benefit Societies Act 2014. This includes co-operative societies, community benefit societies and societies previously known as ‘industrial and provident societies’.

Registration with FCA pursuant to Co-operative and Community Benefit Societies Act 2014.

Industrial and Provident Society

An industrial and provident society (IPS) is an organisation set up to carry out a trade or business for community benefit. It is incorporated, which means that it has gone through the registration process that converts a new or existing business into a corporate body, making it a legal entity in its own right. IPS’s are regulated by the Financial Conduct Authority.

See Registered Societies.

Sources: Department for Business, Innovation & Skills: Insolvency direct: History of Companies in the British Isles. Available at: www.gov.uk/set-up-a-social-enterprise; Privy Council Royal Charters Financial Conduct Authority website

68 Appendix Three Companies in government

Appendix Three

Sample test of governance arrangements

1 We reviewed various aspects of corporate governance arrangements for a small sample of companies in government, including board composition.

Companies in government Appendix Three 69

Figure 20Corporate governance arrangements at 31 March 2014

Principle Low Carbon Contracts Company Limited

NHS Property Services Ltd

UK Financial Investments

Ltd

Green Investment

Bank

Genomics England Ltd

Rolls-Royce

Leadership

Separate Chief Executive and Chairman

Yes Yes No Yes No Yes

Board members 7 12 7 11 9 15

Women 2 2 3 3 2 4

NEDs No information

6 5 9 6 9

Shareholder appointed directors

2 1 1 1 1 0

Effectiveness

Annual board appraisal

Yes self evaluation

No information

Yes self evaluation

Yes self evaluation

No information

Yes external

NED appraisal Annual by board

No information

Annual review by Chairman

Annual by board

No information

Chairman in face-to-face discussion

Accountability

Accounting Officer

1 None 1 1 No information

n/a

Line of Accountability

To Principal AO

No information

No information

No information

No information

To shareholders

Auditor C&AG C&AG C&AG C&AG C&AG as part of DoH

KPMG

Framework Agreement

Yes No Yes Yes No but Articles sets out

shareholder’s rights

Special shareholder’s rights included in Articles of Association

Note

1 Government’s special share in Rolls-Royce does not confer general control or voting rights.

Source: Annual reports and accounts, National Audit Offi ce teams

70 Appendix Four Companies in government

Appendix Four

Audit approach

Figure 21Data sources

Source Remarks

Cabinet Office Public Bodies Data Directory Lists arm’s-length public bodies by administrative category

Office for National Statistics Public Sector Classification Guide March 2014

Lists all public bodies classified to central government and public corporations

Whole of Government Accounts (Designation of Bodies) Order 2014

Lists entities designated for inclusion in the Whole of Government Accounts

Guidance for the Whole of Government Accounts for 31 March 2014

Annex One lists ‘minor bodies’1 not included in the Whole of Government Accounts

Government Resources and Accounts Act 2000 (Estimates and Accounts) Order 2013

Lists bodies designated in relation to a department

Departmental annual reports and accounts Lists companies consolidated in departmental accounts

Individual company annual reports and accounts Lists companies included in the group

Note

1 Those with gross annual expenditure and income during the year and gross assets and liabilities as at year end below £10 million which may be companies.


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